The beginning of every year has traders wondering where to invest next. Should portfolios be rebalanced, or remain the same?
Has an asset reached its peak, and now it’s time to sell the winners and buy the losers? Or is it a good idea to hold on to see how much further a stock can go?
The continuous price swings in stocks are a clear example of how important it is to keep up with the ever-changing markets, as traders rotate away from those that have overperformed and are now looking overvalued.
Looking back at this year, the obvious choices in the market were in the AI and Technology sector, as this has been hitting the headlines repeatedly. Companies such as Nvidia have exceeded expectations and look to go further as we head into the new year.
Is Nvidia an obvious choice?
Nvidia has been a clear winner for most of this year, with its consistent gains and investment in semiconductors and high-performance processing units. The driving factor is the company’s record revenue and high demand for its chips used in AI applications, which have led it to become the first attendee in the $5 trillion market cap club.
A few other stocks might have gone under the radar. Micron and Palantir Technologies have been the main performers, with over 100% moves so far this year.
However, for every surge in price action, a correction is always around the corner.
Nvidia’s stock price rallied from the April bounce to the November peak.
Is the AI and Tech boom going to continue?
Even though the companies mentioned have had stellar returns in 2025. The recent sell-off in AI and tech has left traders wondering if a deep correction is on the horizon.
Palantir, for example, had its worst month in two years, with prices dropping by more than 16% in November. Many economists are focusing on valuation concerns, even though the company posted its second straight $1 billion revenue quarter.
There are clear historical patterns in what we have witnessed over the past 12 months, including the early-2000s telecom boom, when heavy investment in wireless and fibre-optic networks far outpaced actual usage.
Fast forward 25 years, and where are we? Continuous expansion of AI infrastructure on the assumption that future demand will eventually catch up. It sounds like the bubble could begin deflating at any moment.
So where next?
Aside from the AI and tech sectors, healthcare and automotive stocks have also delivered decent returns.
Universal Health Services continues to benefit from its expansion efforts. Net revenues increased almost 10% year on year and are expected to outperform in the next 12 months.
U.S. automaker General Motors is looking to improve its brand portfolio in China through clear market restructuring, which should support long-term growth. GM appears well positioned for sustained earnings growth and shareholder value creation.
The banking sector has been a bit hit-and-miss over the past few years. However, Morgan Stanley’s improved focus on asset and wealth management has most economists looking at more growth for the global financial services company. The firm has an expected revenue and earnings growth rate of 4.1% and 5.8%, respectively, for next year.
What to keep in mind
Gains can always be volatile, as the biggest achievers tend to experience larger market swings. Some of the top-performing stocks may already have priced in a lot of optimism, as future returns could be negative.
The narrative that will define 2026 is whether there is a slowdown in Artificial Intelligence spending. Due to the sheer size of these mega-cap companies, it will be much more challenging to sustain their earnings growth unless key clients ramp up spending even further.
The key to choosing the right stocks isn’t just a case of hitting the buy button when things are going well. It is to find companies that can perform well over the long term, especially during periods of uncertainty when sentiment shifts due to investor fear.
So, have a clear plan and realistic goals. Stay informed, but don’t overreact, and 2026 will seem like a breeze.
